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Robin D.
Robin D., Senior Tax Advisor 4
Category: Tax
Satisfied Customers: 15726
Experience:  15years with H & R Block. Divisional leader, Instructor
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I submitted W8-BEN when I requested to withdraw my 401K, I

Customer Question

JA: Hi. What do you want help with?
Customer: I submitted W8-BEN when I requested to withdraw my 401K
JA: The Accountant will know how to help. Please tell me more, so we can help you best.
Customer: I am from the Philippines and we have a tax treaty with US, I am just not sure about the exact tax rate that wil be witheld
JA: Is there anything else the Accountant should be aware of?
Customer: It would be very helpfull if you can tell me what is the expected tax rate based on our tax treaty with US Okay
Submitted: 1 year ago.
Category: Tax
Expert:  Robin D. replied 1 year ago.

Hello, I'm Robin. Welcome to JustAnswer. I'm reviewing your question now and typing up my reply. I'll post that in just a few moments.

Customer: replied 1 year ago.
Expert:  Robin D. replied 1 year ago.

Under Article 18 of the tax treaty

(1) Except as provided in Article 20 (Governmental Functions), pensions and other similar remuneration paid to an individual in consideration of past employment shall be taxable by the Contracting State where the service is rendered.

The withholding rate for a nonperiodic distribution (a payment other than a periodic payment) that is not an eligible rollover distribution, is 10% of the distribution. So they will withhold 10%.

Customer: replied 1 year ago.
Can you send me the link to that article please?
Customer: replied 1 year ago.
Thanks Robin. I tried to understand article 18 and page 3, but I did not find about the 10% witholding rate. Can you expound this a little bit?
Expert:  Robin D. replied 1 year ago.

The only reason you would have completed a W8 BEN is because you are a non US person.

There are special rules for non US persons that receive US sourced payments or income. The treaty is the first place to look but as it only says the US can tax you and no lower rate for tax the rules for non US persons comes into play.

The term NRA withholding is used in this area to refer to withholding required under sections 1441, 1442, and 1443 of the Internal Revenue Code. Generally, NRA withholding describes the withholding regime that requires 30% withholding on a payment of U.S. source income.

Fixed, Determinable, Annual, or Periodical (FDAP) income is all income with a few exceptions (not relevant to your situation).

Tax at a 30% (or lower treaty) rate applies to FDAP income or gains from U.S. sources, but only if they are not effectively connected with your U.S. trade or business.

You have to look to pension withholding

Expert:  Robin D. replied 1 year ago.

Hope this was helpful.

I have an appointment now. Best wishes